Hong Kong Regulators Impose $166 Million Fine on PwC Over China Evergrande Audit

PwC Faces HK$1.3 Billion in Fines and Compensation Over Evergrande Audit

Hong Kong's accounting regulator has announced a six-month ban on PwC, one of the world's biggest accounting firms, from working for new clients in Hong Kong. The ban is in addition to a HK$1.3 billion payment in fines and compensation, which PwC will make in relation to its audit work for the failed Chinese property developer Evergrande.

Evergrande, one of China's biggest property developers, defaulted in 2021 and became the world's most indebted developer with roughly $300 billion in liabilities. Its rapid downfall was the most prominent case of failure in China's property sector, which was embroiled in a liquidity crisis after authorities cracked down on excessive borrowing in the industry.

PwC's Misconduct and Fines

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In 2024, PwC was fined by mainland Chinese authorities 441 million yuan over its Evergrande audit. The Hong Kong Securities and Futures Commission also investigated PwC's work relating to Evergrande's financial statements for 2019 and 2020 and found that its annual revenue and profits were "substantially overstated." Revenues were overstated by roughly 564 billion yuan over the two years.

The Hong Kong commission said there were "serious breaches" of professional duties by PwC and that the accounting firm had "knowingly permitting" unsupported or unjustified adjustments in the financial statements. PwC had reached an agreement with the commission to set aside HK$1 billion for compensating minority shareholders of Evergrande.

Accounting Firm's Response

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PwC Hong Kong acknowledged that the work on the Evergrande audits fell well below their high expectations and the expectations of their stakeholders. The firm stated that resolving these regulatory matters is an important step for the firm.

Evergrande's founder, Hui Ka Yan, pleaded guilty to charges including fraud and bribery in a mainland Chinese court after being detained in China. Liquidators of China Evergrande are also pursuing legal action against PwC separately in Hong Kong in an attempt to recover what it could for creditors.